Following a judge's suggestion, 16 former KPMG partners facing charges over their role in selling questionable tax shelters are suing the Big Four firm for legal fees.

In late June, S. District Judge Lewis Kaplan ruled that prosecutors had wrongly pressured the firm to cut those fees off and invited the defendants to submit claims for past and future legal bills in the case.

According to the complaint, KPMG broke an "implied contract" to advance fees, based on the firm's practice of doing so in past civil, regulatory, and criminal cases and prosecutions. KPMG has not commented on the suit. In August, the firm agreed to pay $456 million to avoid prosecution over its sale of abusive tax shelters and threatened to fire workers who didn't cooperate with federal investigators. KPMG has a longstanding policy of covering workers' legal costs, and Kaplan wrote in his ruling that he didn't believe the government was telling the whole story in its denials that it had encouraged KPMG to set a $400,000 cap on the defendants' legal costs.

The defendants' trial is slated to begin on Sept. 11, but several of the defendants have requested a four-month delay.

Kaplan said that ultimately he agreed that the former KPMG executives' right to a fair trial was being threatened. "KPMG refused to pay because the government held the proverbial gun to its head," Kaplan wrote. "Had that pressure not been brought to bear, KPMG would have paid these defendants' legal expenses."

Previously on WebCPA:

Judge: KPMG Defendants' Court Costs Should Be Covered (June 28, 2006)

KPMG Gets Okay for $153M Settlement (June 6, 2006)

More KPMG Execs Indicted over Shelters (Oct. 19, 2005)

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